RIL to share oil subsidy

Agrees to give discounts, supply 1.13 million tonnes of kerosene to oilcos.

Reliance Industries Ltd (RIL) has reached an agreement with public sector oil marketing companies (OMCs) on supply of petroleum products.

Under pressure to share under-recoveries being suffered by OMCs because of below-import parity retail prices, RIL agreed to a discount on a yearly basis on the supply of petroleum products.

RIL has also agreed to supply 1.13 million tonnes of kerosene to OMCs which would be equivalent to the quantity supplied by the private refiner last year. It will also be supplying around 26 million tonnes of liquefied natural gas to OMCs.

The exact quantum of discount is still being worked out by the companies. The two sides reached an agreement on the quantities on July 12 though Petroleum Minister Mani Shankar Aiyar, in a review meeting, later wanted that in the event of shortage of kerosene for the public distribution system, companies should be asked to get government permission before exporting aviation turbine fuel (ATF). OMCs have been asked to monitor the supply of kerosene for PDS.

During the production of petroleum products, refineries can produce greater quantities of ATF at the cost of kerosene. Since ATF has better price realisation, companies find it profitable to produce it more than kerosene.

Officials said the government was threatening to invoke provisions under the Essential Commodities Act and direct all refining companies, including those in the private sector, and joint venture refineries, to produce 7 per cent of their total refinery crude throughput as kerosene to maintain adequate supply.

According to an industry agreement reached on July 12, the other refiner, Mangalore Refinery & Petrochemicals Ltd, will be supplying kerosene in proportion to its crude throughput.

MRPL had expressed its inability to supply the last year's quantity since it felt its share during 2004-05 was more than that of other companies.

"It has been decided that after taking into consideration supplies from RIL, the country's balance kerosene requirement during 2005-06 will be met by supplies from Indian Oil Corporation, Bharat Petroleum, Hindustan Petroleum and MRPL at a uniform percentage of their crude throughput," said an official.

The refinery gate price of LPG was frozen at $376 a barrel while that of kerosene at $418 a barrel following a spike in international prices in March. At the current level, LPG has touched $400 a barrel while kerosene at $496 is threatening to touch $500 any time now. RIL and MRPL are, therefore, demanding lifting of the freeze.

OIL IN A DAY'S WORK

• RIL to supply around 26 mt of LNG to oilcos
• OMCs asked to monitor kerosene supply for PDS
• MRPL to supply kerosene in proportion to its crude throughput